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Health Care Current – October 1, 2013

My Take: Health Insurance Exchanges: Now Taking Orders…

Common wisdom says, don’t rush to dine at a new restaurant the day it opens; instead, wait a few weeks or a month so the staff learns its way around the kitchen, menu winners are perfected (and flops are remedied) and early patrons’ reviews appear on social media.

Similarly, consumers are being counseled by sources ranging from POLITICO Pro1 to Forbes.com2 not to rush to select a health plan today, October 1, when the Affordable Care Act (ACA)-mandated state health insurance exchanges (HIX) open for enrollment. As with any new process or system, there is the potential for items that require attention and modification. Also, HIX stakeholders including, states, federal agencies, health plans, technology vendors, employers and others, may need time to perfect operations.

There are high levels of uncertainty surrounding both the overall volume and the timing of HIX enrollment. The Congressional Budget Office (CBO) estimates that approximately 24 million people may purchase coverage through HIXs by 2020.3 Of that total, the CBO projects that seven million will purchase coverage during the initial six-month enrollment period. More recent estimates from a variety of private sector sources project substantially lower initial enrollment, with some projecting around four million enrollees.

Enrollment is likely to come in waves, including pent-up demanders, early adopters, holiday shoppers and last-minute movers. We don’t have perfect precedents on which to base our estimates; however, on a large-scale, national level, the Medicare Part D rollout in 2005 and 2006 is a good analogous experience. Approximately 5.4 million beneficiaries enrolled by January 1, 2006, when the first prescription drugs were covered by this new entitlement program. By the end of the first benefit year, enrollment more than doubled to 13.2 million.4

Challenges Ahead for HIX Stakeholders

The interdependencies of operating an exchange require that each party stays coordinated and honest as to their status and roadblocks. Here are some of the challenges facing the primary HIX stakeholders―states, commercial health plans and employers―and suggested focus areas for the initial six-month open enrollment period.

States

States are required to open their HIX doors on October 1, but some establishments are more ready than others. As of this writing, 16 states have built their own exchange; seven are partnering with the federal government to help run the state’s exchange in 2014; and the remainder have opted to use the federal exchange in year one.5 (They may be able to convert to a state-based exchange later or continue using the federal exchange.)

Enabling exchange enrollment is a complicated endeavor for states. They need to coordinate processes and information technology (IT) systems with the federal hub; with individual commercial insurance plans; and with third parties, such as the National Association of Insurance Commissioners’ (NAIC) System for Electronic Rate and Form Filing (SERFF), which enable companies to send and states to receive, comment on and approve or reject insurance industry rate and form filings.

Some states’ systems and processes are up to the task; others may default to taking more paper applications or using call centers at the beginning of the enrollment period, with the goal of getting to more a technology-based solution over time. Also, while some states have heavily promoted the October 1 date, others have not, perhaps driven by a “let’s not over-advertise and under-deliver,” philosophy: these states may want to make sure their system works well before they have a grand opening, so to speak.

As it was during HIX development, collaboration and reuse will be important to help states get through their “soft” opening. Continued participation in knowledge-sharing calls and leveraging existing deliverables and software will be beneficial as states go through the initial days of implementation.

Health Plans

From a health plan perspective, January 1 will be at least as important a date as October 1, as plans must be ready to accurately pay claims and issue premium bills with the dawn of the new year. This is not to discount the complexity and challenges inherent in the October 1 launch of processing enrollment transactions, including making sure people are signed up for the right plan, with the right copays and deductibles, at the right premium level, with the right federal subsidy calculations. Both October 1 and January 1 are major milestones for plans, which are grappling with challenges both external (such as HIX data exchange) and internal (such as new or enhanced information systems). With so many new variables involved in issuing ID cards, mailing welcome kits, sending premium bills, paying claims, answering customer service calls, interfacing with brokers and agents, responding to provider inquiries and dealing with new government data systems and rules, there are considerable opportunities for glitches to occur. And they will.

Employers

Deloitte’s 2012 Survey of U.S. Employers reveals that three in five employers are familiar with HIXs.6 Most employers also are aware that the employer mandate has been deferred until 2015. But most don’t realize that they still must comply with reporting requirements and inform their employees about the existence of exchanges, how they work, their plan options, etc.

Employees need more and better information to help them understand HIX, their coverage options and potential eligibility for tax credits and Medicaid programs. Some states and the federal government have recently launched or have planned campaigns to increase awareness.7 However, the standard communication materials published by the government and being adopted by many health plans are somewhat complex. Employers would be wise to send out their own notices about the exchanges or add a cover letter to the government materials to help employees understand their contents and why reading them is important.

Deloitte’s employer survey findings suggest most employers will be taking a “wait and see” approach to HIX enrollment; however, recent media reports indicate large employers are starting to shift select populations to the private exchanges. With employer penalties and reporting deferred until 2015, the coming months would be a good time to formulate a long-term HIX strategy to address the implications of HIX and other reform-related programs on their organization. The health insurance marketplace is changing and there are options for employers and employees that didn’t exist a year ago. Employers need to understand these changes so they can determine their approach moving forward.

Big Days Ahead

The October 1 opening of HIX enrollment is worthy of the considerable media coverage it is generating because it marks a key milestone in U.S. health care reform: enrolling in exchanges offers a light at the end of the tunnel for people who currently don’t have and/or can’t afford health care coverage. However, the specific date of October 1 is likely overhyped because that is just the first day in a six-month initial enrollment period.

Many health care stakeholders are looking beyond October 1 and the HIX launch to the prospect of “HIX 2.0,” when the industry starts to think about transitioning from better coverage to better outcomes. This transition likely will be one of continuous innovation rather than big-bang evolution; next October’s enrollment period will see the debut of new menu items, as will the one after that. Things could get exciting the longer the HIX restaurant is open for business.

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